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Despite their cultural and economic importance, creative micro-enterprises have received very little attention from academia research, especially with respect to vertical co-operation—customers and suppliers—and innovation. This study aims to fill the literature gap by studying how vertical co-operation improves the performance of micro-enterprises in textile crafts through innovation. A questionnaire was used to collect data from creative micro-enterprises in the textile craft sector operating in the Matiari District of Pakistan. To test the construct validity of the research, Exploratory Factor Analysis (EFA) and Confirmatory Factor Analysis (CFA) were conducted, and to examine the hypotheses, the bootstrap re-sampling method was used with the SPSS PROCESS macro developed by Hayes. The findings of this study indicate that vertical co-operation positively and significantly affects the innovation and performance of creative micro-enterprises in textile crafts. In addition, we find that innovation plays a significant mediating role between vertical co-operation and performance. Furthermore, contrary to some studies, we empirically provide evidence regarding innovation in craft in terms of product development (design, size, shape, color, etc.), improvement in quality, and replacement/modification of tools.

Vertical Co-operation in Creative Micro-Enterprises: A Case Study of Textile Crafts of Matiari District, Pakistan